Local authorities in the US routinely ask property developers to open standby letters of credit (L/Cs) to guarantee that they build properties that meet legal standards or the specific requirements of planning permissions. If the developer fails to meet its obligations, then the L/C should be cashed or renewed.

A case in southern Texas however has revealed that local authorities sometimes fail to use the safety mechanism these L/Cs provide.

No sewerage

The incident that highlighted state and federal unwillingness to use the L./C safeguard involves a couple that bought some land in Cameron Country, Texas, where they planned to put a trailer in which they would live.

Once they had purchased the land and a trailer they found that the developers had not installed a septic tank on the site and without this, they apparently were not allowed to connect to the electricity network. The couple only moved in to their trailer a year after it was located there, after eventually paying for a septic tank to be installed.

Legal requirements

Local legislation requires developers in this region on the border with Mexico to ensure residential lots are sold with water and sewer service by installing it themselves or providing a L/C guaranteeing instalment once it is known where a home will be located on the property.

County planning departments are supposed to cash in the L/C if the work is not done or require the developers to renew the L/Cs.

Too busy

According to Cameron County records however, the county did neither of these things and between 2000 and 2002 there were at least 17 similar cases.

The county could take developers to court, but has not done so, claiming that it is just too busy to do so.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.